One of Anthony Rangel’s childhood memories is playing football surrounded by yards of white chiffon, taffeta, and tulle. That’s because one of the many jobs his mother juggled to make ends meet was in a bridal store. And because she could not afford childcare, her son usually went with her. “When I say that I saw my mom doing two or three jobs, I literally saw that because I went to work with her,” says Rangel.
For 4-year-old Rangel, football amidst wedding gowns might have been fun. But for his mother, supporting a family on a low income was not. As a single mom struggling to pay the household bills, she — like millions of Americans — had no choice but to take out a payday loan that came with interest rates so high that for the next decade the repayments were by far the biggest expense on the family budget.
Rangel’s childhood experience of financial struggles informed his decisions as an adult. “I knew that I wanted my career to be something that shaped impact for communities like mine,” he says.
This led him to develop expertise in financial inclusion and to the creation of a company called float. This is the business he is now building that, by enabling loan decisions to be based on holistic indicators of creditworthiness, like on-time payment history for rent and utilities, will make it easier for financial institutions to extend credit to working Americans.
Rangel knows from personal experience how transformational financial security can be. After securing a university scholarship, he used a portion of the funds to pay off his mother’s loan. “It was night and day,” he says. “What felt like not that much money was life-changing for us and especially for her.”
The Problem
For low-income families, small amounts of money can create big problems when that money takes the form of debt. For example, according to Federal Reserve data, around 37% of Americans cannot afford to cover a $400 emergency expense with cash, meaning they would need to borrow money or use credit to pay for it.
For these families, debt often arises because it’s hard to track which bills are due and when, and because, after covering basic necessities, they rarely have spare cash to save for the inevitable financial shocks. Meanwhile, little support is available to manage weekly cash flow, especially for gig and hourly workers.
To pay their bills, many families end up overdrawing on their bank accounts and incurring penalties, paying high interest rates and late fees on credit cards, or taking out a payday loan. In fact, every year, more than 12 million borrowers take out payday loans in the 26 states where payday lending is legal, according to the Consumer Financial Protection Bureau. A typical payday loan is $350 and comes with a $15 fee per $100 borrowed. With a repayment period of two weeks, borrowers end up with nearly a 400% annual percentage rate (APR).
The consequences can be dire. If a borrower is unable to repay their first payday loan in full when it’s due, they may have to take out a second loan from a different lender. They can easily end up with multiple payday loans for which they pay hundreds of dollars in fees and risk losing essential assets like their home or their car. In this way, a payday loan can lead the borrower into long-term debt, with serious consequences for their financial stability and overall well-being.
But while Rangel and his co-founder, Shubhi Jain, also MBA ’24, were aware of these problems, it was when conducting interviews with hundreds of people living in low-income communities during Stanford GSB’s Impact Design Immersion Fellowship in New York that they came to understand the true cost of lack of access to appropriate credit at a fair interest rate, especially for the households that can afford it least.
Some of what they heard was wrenching. Rangel describes the plight of a woman whose medical debt had been sold to a debt collector. After the collector showed up at her workplace, she worried that she would lose her job. And while that didn’t happen, her employer started taking the money out of her paycheck to pay the collector. The outstanding bill is three times her annual salary and these payments will likely never go away.
“This is heartbreaking,” he says, recalling the temptation to stop everything and help the woman by connecting her to legal resources to fight the garnishment judgment or to renegotiate the original debt. But while they introduced her to legal counsel, Rangel and Jain made the hard decision not to go further. “Our aim is to harness new sources of information to help credit bureaus and financial institutions systematically serve low-income people better, to serve millions of people facing these same struggles,” he says. “If we stopped and helped directly every time our hearts were broken, we’d never be able to build the tools to fix these problems at their root cause.”
The Solution
After graduating from Stanford and spending the summer developing their idea, Rangel and Jain found that the business model they thought could solve the problems facing so many of their interviewees needed a different approach.
Initially, they planned to develop an app connecting people to their own financial data and providing information on how to avoid late payments and the trap of penalty fees and high interest rates. However, they knew that low-income people would have a limited ability to pay for this service, and wanted to build a world-class platform to serve the millions of Americans who are one bill or one paycheck away from a financial crisis.
They also needed to reach their customers and build trust among the communities they wanted to serve — but without incurring huge marketing costs. “You also have to earn trust,” says Rangel. He explains that low-income communities are particularly wary of those trying to offer financial assistance — and rightly so, given that they are often targeted by fraudsters.
Like so many entrepreneurs, Rangel and Jain decided to pivot — in their case moving away from a direct-to-consumer model. “Both those challenges made us realize there were different approaches we needed to try,” he says. “So we looked for the change agents that were already in these communities, that had trust and goodwill, and that could also make an impact.”
This led them to credit unions. These member-owned nonprofit financial institutions offer similar services to commercial banks but have a mission to use equitable access to financial services to strengthen communities.
“The credit union movement is not well understood,” says Rangel. “But these are phenomenal nonprofits serving more than 130 million Americans. And boosting financial inclusion is in their charter.”
Credit unions, he explains, provide the same products and services as traditional banks — such as credit cards, checking and savings accounts, and loans — and often have better rates and fees than for-profit banks. Profits from interest and account fees are reinvested into their products.
The founders’ idea is to partner with these institutions to provide a more holistic assessment of creditworthiness for potential borrowers who cannot currently be approved for a loan through the traditional means of establishing credit history, which is through income, outstanding debts, assets, and collateral.
Credit union members — who opt to allow their data to be accessed — will be sent to the company’s platform, where data such as on-time payment of utility bills and rent can be used to build a more complete and representative credit history. Artificial intelligence helps, making it possible to use a wide range of data sources to build a more holistic picture of borrowers’ creditworthiness. “We take the complex process of reviewing all these payments and turn it into something the credit bureaus can ingest,” explains Rangel.
For the credit unions, a partnership with the company will increase their impact since they can approve greater numbers of qualified low-income borrowers for loans that, unlike those of predatory lenders, have reasonable interest rates.
Rangel and Jain believe that working with credit unions will ensure mission alignment in prioritizing the needs and financial well-being of their customers. Conversations with chief lending officers in more than 100 credit unions confirmed this. It is a model, says Rangel, where everyone wins. “The borrower is getting approved at a healthier interest rate based on their demonstrated ability to pay bills, and the credit unions are happy to expand their book of business.”
The Innovator
In his first job after college at Accenture, Rangel’s clients were state agencies providing low-income benefit programs such as food stamps and Medicaid — programs his own family had relied on. “I was building systems that I’d been directly on the other side of,” he says.
But while he understood the public sector’s ability to effect change, he believed the private sector could often fill holes in the social safety net at greater speed and scale. So before starting his business school training, he joined a start-up creating a mobile banking experience for people who rely on the Supplemental Nutrition Assistance Program (SNAP, also known as food stamps).
At Stanford, his vision for building a business to advance financial inclusion took root when he met Jain, a fellow student who shared his passion for making a difference. Through countless conversations and shared experiences, they discovered a common purpose: to empower low-income families with tools to improve their financial well-being and unlock opportunities.
Rangel and Jain applied for and won a GSB Impact Design Immersion Fellowship, which supports MBA social innovators in understanding target users, testing hypotheses, and prototyping ideas. A partnership with the Robin Hood Foundation’s Blue Ridge Labs gave them access to the communities in New York that enabled them to conduct their initial research for the business.
Throughout this journey, the co-founders realized that they not only shared a desire to make an impact, but also a belief that private sector innovation offered them the greatest potential to do so. “Under-served communities are untapped markets,” says Rangel. “And if companies build solutions that are designed to fill the needs of those communities, it can be a win for both.”
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